In the revaluation model for capital assets, where are gains from revaluation recorded?

In the revaluation model for capital assets, gains from revaluation are recorded in Other Comprehensive Income (OCI). This treatment aligns with the objective of the revaluation model, which is to reflect the current fair value of an asset on the balance sheet while minimizing the impact on profit from regular operations.

When a capital asset is revalued and the revaluation results in a gain, this gain is not recognized in the profit and loss statement immediately. Instead, it is recorded in OCI, which is part of the equity section of the balance sheet. This allows the gain to be reflected in the overall equity of the company without affecting the income for that period, thus providing a clearer picture of ongoing operational performance.

Additionally, when the asset is eventually sold, any cumulative revaluation gains included in OCI may be transferred to retained earnings, but until that time, those gains are recognized in OCI to adhere to the requirements of International Financial Reporting Standards (IFRS) concerning asset revaluation.